Suppose that offi cial statistical data on two macro indicators were just released in the US. The price growth for past month proved 2.5% while market participants expected it to be 2.1%. The new number of claims for unemployment bene ts was 30,000 compared with 25,000 expected by the market.
a. What will be a response (if any) of the US dollar exchange rate against the euro? Why? What assumptions do you make with regard to the behavior of the European Central Bank and/or the US Federal Reserve?
b. Suppose that only data on claims for unemployment bene ts were published but not on in ation. What would be a reaction of the USD/EUR in that case? Why?
c. Suppose that only data on in ation were published but not on claims for unemployment bene ts. What would be a reaction of the USD/EUR in that case? Why?